Courts continue to scrutinize employer efforts to compel employees to arbitrate all employment disputes.

The Appellate Division of the New Jersey Superior Court ruled recently that even if an employee specifically agreed to arbitrate all employment claims, such an agreement is not valid if the agreement did not clearly inform the employee that he or she was waiving the right to seek relief in court.  Barr v. Bishop Rosen & Co., Inc. (October 26, 2015).

The court, following a line of other court decisions, stated that “clarity is required” to inform the parties to the agreement that they are “giving up their right to bring their claims in court or have a jury resolve their dispute.”  The agreement offered by Bishop Rosen & Co. made clear that the parties were choosing to arbitrate their disputes, but said nothing about surrendering the right to seek relief in court.  And a later notice from the employer, years later, did not cure that defect.  As a result, the arbitration agreement did not constitute knowing and voluntary waiver of that right, and the employee could pursue his claims in court, the appellate court held.

This case helpfully identifies specific language that has been held acceptable to show a knowing waiver of the right to court relief, including the following :

• A clause in which the plaintiff agreed “to waive [her] right to a jury trial” and that “all disputes relating to [her] employment . . . shall be decided by an arbitrator.”
• An agreement in which the parties expressed that they “understand and agree that they are waiving their rights to maintain other available resolution processes, such as a court action or administrative proceeding, to settle their disputes.”
• And a clause that stated the parties agreed that “[i]nstead of suing in court, we each agree to settle disputes (except certain small claims) only by arbitration.”

The Barr case highlights just one of the many requirements of an enforceable mandatory and binding arbitration agreement.  Employers and employees should exercise extreme care, and seek professional counsel, before drafting up or agreeing to sign such agreements, as any defect could lead to the agreement not being enforced.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.